Yeah. Lease is a not a debt but its a obligation to pay over time. Also - your car, which is an asset - isn't liquid. A person that buys the car, can sell the car at anytime to get back their money. A person that leases a car, can't not sell or do anything to the car and is forced to keep paying payments.

Why isn't it the best financial move if someone can afford it?
I'm planning to pay for my C43 AMG in cash and full once it gets here. Why did I choose to do that? Because it becomes an asset that is liquid. I can sell it at anytime and get money back.
If I wanted another car in 3-4 years, I can sell the C43 AMG and then repurchase another car. If I do that, I actually spend less money in those 3-4 years time-frame versus leasing.

What? Paying off your mortgage early is not financially dumb. If you say paying off your mortgage early is dumb, that is like saying if you have the chance to buy a house in full - you decided not to and get a mortgage instead. The only reason people mortgage is because they can't pay for the house out right.
I run a start-up real estate company in the Bay Area that is part of my Dad's developer firm. We get oversea clients that pay for SF houses in full. If you pay in full, you don't have to pay interest on the mortgage and save money.

When you paid off your mortgage early, you saved money. You also get to technically own your house too because it effectively became yours once the mortgage is finished.

This. +1 Udel!

I also definitely agree - re-financing and taking out a second mortgage to get extra money is stupid. Its a dangerous risk. However - it can be smart if you know what you are doing.

Agreed, mmarsh. People only lease vehicles that are this high in the price range because they can't afford to buy it. Its much cheaper to lease it than buy it.

But this goes back to our "keeping up with the jones" chat. People are so obsessed with having nice things and buying things outside of their means, they would lease an Audi A8 for 3 years instead of just buying an Audi A4. The smart thing would be let go of that ego to own the best thing and buy something that fits your need that you can own.

For business use, you can definitely take it out of your taxes. Its even better if you can buy the car as a whole and still take out of your taxes as business too.

 

So let's say someone loses their job and still has 2 years on their lease, what happens then if they can afford to pay for the car. It gets taken back. You then have no car. But you need to get around right, you need to get to an interview, or pick up the kids, or whatever the case maybe. All avoided if you pay off the car. This is why I usually say that leases are a terrible idea. Owning a car is just one less stress once it is paid off.

I am trying to wrap my head around this. I just can't. The interest paid in a mortgage over say 30 years is just astronomical. After once paid off, it is yours. No more need to worry about the rent or being evicted. Plus, if your place gains significant value, you can always sell it and downsize. There are so many options.

Add both a paid off car + a paid off home, how could that anything else possibly be less risky?

Yes, you can absolutely do this as well.

 

Agreed, its all relative. You just have to look at whether that equity in the house would have netted you $9,000 or more in returns invested is the question.

This is all just mindset. You can trade in your leased car at any time too, and if its upside down you just pay off the negative out of the cash you would have spent for the car. All you have is the money tied up in a depreciating asset, at risk for devaluation due to damage, market shifts, etc...instead of the money invested where it has the potential to earn a return.

The money doesn't "disappear" because you chose to lease a car instead of using it to buy a car in cash.

I would also challenge that paying cash saves you money over leasing if you only keep the car for 3-4 years. I've done that math many times over and I've never seen the numbers come out positive for buying until you get to 5-6 years. When you factor average market returns for that $70,000 or whatever it is over those 3-4 years you're way upside down buying and paying cash.

If you want a luxury car every 3-4 years, leasing is the cheapest way to accomplish that,

Again, mindset. I know many people who could buy houses in cash who get mortgages, it happens all the time. I'm one of them.

Debt is a financial management tool, its a very wise move to use debt in a smart way to help accomplish your financial goals,

I own an established multi divisional real estate company. Overseas clients are different. They're specifically looking for places to park money. Its not about growth for them.

Small thinking, you should think bigger, especially in our business. You own your house whether its mortgaged or not, the mortgage is just a lien against your house.

How can something be "stupid", "a dangerous risk" yet also be "smart if you know what you're doing". You sound like you have no idea what you're talking about.



Absolutely false, I have a 7 figure net worth and I lease. I could buy out my lease right now with whats in a checking account. Why would I want to do that when Uncle Sam pays half of my lease payment for me?

Wrong. The lease deduction is much better than the ownership/depreciation deduction, unless its a truck over 6,000 GVWR, then it may make sense to buy it. Remember if you finance it, that interest is tax deductible too and its above the line, so it reduces your self employment tax too. If your business makes over $150k or so its about a 50% savings. My deduction for my LS460L last year was $33,000, I know because I just finished my taxes. Because thats a business deduction that reduces my tax liability by about $16,000. Pays my lease payment and then some.

If you can deduct a vehicle for business, buying a C43 vs leasing it is crazy, I can't think of one accountant who would say it wasn't, especially if you aren't going to keep it more than 3-4 years.

If someone couldn't make their lease payments if they lost their job they aren't the person we're talking about. That person has to wealth to worry about.

You cant sell it and downsize if you have a mortgage on it? It appreciates the same, the mortgage balance doesn't go up as it appreciates. Thats part of the point, you're using other peoples money to acquire an asset that goes up in value, but the growth of the asset is built off the assets whole value, not just the portion of your cash thats in it.

You're not wrong. Thats the "least risky", but the "least risky" option generally has the least potential upside too. If you really want things to grow, you have to take some risks along the way.

 

 

Haha, you're right! All that free time. I drove by a Goodyear store with the Roll trucks out front. I took a pic, I will post it in the thread.

The reason why I have as much net worth as I have at my age is because of the way I've approached houses, and cars, etc. If I had been paying cash for cars and trying to pay off my house as fast as I could, I wouldn't have been able to invest the way that I have to create that net worth. Obviously, the market has helped a lot...but if I didnt have money to put into investments then I wouldn't have been able to position myself to take advantage of that market growth. Thats the whole reason why I share that and why I get so fired up over these discussions. Because I have been there, and researched this and put it into practice and I know what works and what doesn't work.

You're totally right that everybody approaches life differently. If you save and invest, research big financial purchases before you make them to make those purchases as lean as you can, you're ahead of 90% of Americans.

My point is, that had I been saving for a car or saving for a house or using my increases in income to go towards paying down debt vs investing, I'd probably be about 25% as far along today as I am. But I'd have a paid off house and outright owned cars. Which would you rather have?

 

 

 

 

this is all dependent on one's situation and risk profile and investing style. most will NEVER have the option of buying out their mortgage, or even leasing an A8 (ahem, subject of this thread).

 

FYI, just as an aside comment, the average price of a new A8, today, is a lot more than with I actually paid for my small townhouse when I bought it in the late 1970s....it was still under construction at the time, and I was living with my parents. In fact, what I paid for my house wouldn't buy an A6 today....it might get you an A5 Sportback, depending on options.

 

In the spirit of irony and fair play, you should get a hold of a 2019 A8 and review it with one of your capsule road tests. You did the Continental awhile back, why not the A8?

 

You miss the point, you don't start out with $500k in cash. I bought my house when I was 24. I didn't have $500,000, I put 5% down on it, it was $430,000. I did however have good income and I was able to develop, alongside professionals, an investment plan and fund that plan strongly despite my young age. That monthly/annual funding is what has become the $1M+ in net worth. If I had chosen to simply pay off my house as fast as I could, I would have had to allocate that monthly investment funding amount towards simply paying off the mortgage. I'd likely have a paid for house, but I would not have $1M in net worth at this point had I done that. Doing it my way vs your way has netted me 600-800,000 more over that period of my life. THATS the point.

As for a $250,000 house...you can't buy a $250,000 house here you would want to live in LOL. My "$500,000 house" is a 3BR townhouse. Thats one of my plans for the next year or two, to buy a bigger house, so that will become a $750-850k house. I'll put 20% down to get the best rates and terms, and keep the rest invested. Have to decide if I want to sell mine or keep it and rent it.

Exactly, the point is people shouldn't make blanket statements like "leasing cars is always a bad decision" or "you should always buy a car in cash and pay your house off as soon as you can". If that works for you, fine...but don't say what I've done is stupid because I'll match anybody dollar for dollar and plan for plan anyday.

 

So do you own a house or not own one? I though you always rented.

 

OK, I'll consider that a request. I'll put it on my list.

One reason I did the Conti at the time (besides the fact that I found it an interesting new product) was that the auto press itself was either ignoring it or, for whatever reason, not releasing their own reviews.

 

No lol, I own a house, I have for 10+ years.

Renting a home is silly, almost always better to buy a house.

Haven't you heard me mention lots of times not wanting to pay off my mortgage and the tax deductibility of mortgage interest?

The only time I would ever suggest somebody rent instead of buy a house would be if they were only going to live someplace for a couple years (less than 5).